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Income Taxes
 12 Months Ended
Dec. 31, 2014
Income Tax Disclosure [Abstract]  
Income Taxes

NOTE 16—INCOME TAXES

   

(a) Composition of loss from continuing operations before income taxes is as follows:

 

    Year ended
December 31,		  
    2013     2014  
Domestic   $ (19,710 )   $ (8,204 )
Foreign     (1,476 )     (2,091 )
    $ (21,186 )   $ (10,295 )

 

Income tax expense (benefit) consists of the following:

 

    Year ended
December 31,		  
    2013     2014  
Current:                  
Federal     $ —     $ —  
State and local       2       1  
Foreign       —       120  
      2       121  
Deferred:                  
Federal       —       —  
State and local       —       —  
Foreign       154       43  
      154       43  
Total income tax expense     $ 156     $ 164  

   

(b) Effective Income Tax Rates

 

Set forth below is reconciliation between the federal tax rate and the Company’s effective income tax rates with respect to continuing operations:

 

    Year ended
December 31,		  
    2013     2014  
Statutory Federal rates       34 %     34 %
Increase (decrease) in income tax rate resulting from:                
Tax on foreign activities       3       8  
Other, net (primarily permanent differences)       (2 )     (4 )
Valuation allowance       (36 )     (40 )
Effective income tax rates       (1 )%     (2 )%

   

(c) Analysis of Deferred Tax Assets and (Liabilities)

 

    As of December 31,  
    2013     2014  
Deferred tax assets consist of the following:                
Employee benefits and deferred compensation   $ 1,679     $ 1,714  
Asset impairments     2,693       2,693  
Other temporary differences     262       (186 )
Net operating loss carryforwards     9,713       17,739  
      14,347       21,960  
Valuation allowance     (13,758 )     (21,473 )
Net deferred tax assets   $ 589     $ 487  

 

Valuation allowances relate principally net operating loss carryforwards related to the Company’s consolidated tax losses as well as state tax losses related the Company’s GridSense and OmniMetrix subsidiaries and book-tax differences related asset impairments and stock compensation expense of the Company. During the year ended December 31, 2014, the valuation allowance increased by $6,043. The increase in the valuation allowance in 2014 was primarily attributable to the net losses recorded in the Company’s U.S. operations.

 

Deferred tax assets relate to primarily to employee benefits and other temporary differences at the Company’s DSIT subsidiary. Such assets are included in Other current assets ($138 and $192 at December 31, 2013 and 2014, respectively) and Other assets ($451 and $295 at December 31, 2013 and 2014, respectively).

 

(d) Summary of Tax Loss Carryforwards

 

As of December 31, 2014, the Company had various net operating loss carryforwards expiring as follows:

 

Expiration    Federal*     State     Foreign  
2022-2034   $ 48,255     $ 20,854     $ —  
Unlimited     —       —       508  
Total   $ 48,255     $ 20,854     $ 508  

 

* The utilization of a portion of these net operating loss carryforwards is limited to a total of approximately $73 per year due to limits on utilizing the acquired net operating loss carryforwards under Internal Revenue Service regulations following a change in control.

    

(e) Taxation in the United States

 

On October 22, 2004, The American Jobs Creation Act (the “Act”) was signed into law. The Act includes a deduction of 85% of certain foreign earnings that are repatriated, as defined in the Act. The Company’s foreign earnings are derived from the Company’s Israeli and Australian subsidiaries. The Company does not expect any foreign earnings to be repatriated to the United States in the near future.

 

As a holding company without other business activity in Delaware, the Company is exempt from Delaware state income tax. Thus, the Company’s statutory income tax rate on domestic earnings is the federal rate of 34%.

  

(f) Taxation in Israel

 

The income of DSIT is taxed at regular rates. On August 5, 2013, the Law for Changes in National Priorities (Legislative Amendments for Achieving Budget Objectives in the Years 2013 and 2014) - 2013 was published in the Official Gazette, by which the corporate tax rate was raised by 1.5% to a rate of 26.5% for the 2013 calendar year.

 

Effective January 1, 2014, DSIT expects to be able to file its tax returns in Israel as a “Preferred Enterprise”. As a Preferred Enterprise, DSIT’s corporate income tax rate for 2014 (and beyond) will be 16%.

  

(g) Taxation in Australia

 

The income of the Company’s GridSense subsidiaries is taxed on their worldwide taxable income at the general corporate tax rate which currently stands at 30%. During 2014, the Company effectively shut-down its Australian operations and only has minimal residual activities in Australia. See Note 5.    

 

(h) Uncertain Tax Positions (UTP)

 

As of December 31, 2013 and 2014, no interest or penalties were accrued on the balance sheet related to UTP.

 

During the years ending December 31, 2013 and 2014, the Company had no changes in unrecognized tax benefits or associated interest and penalties as a result of tax positions made during the current or prior periods with respect to its continuing or discontinued operations.

 

The Company is subject to U.S. Federal and state income tax, Australian income tax and Israeli income tax. As of January 1, 2015, the Company is no longer subject to examination by U.S. Federal taxing authorities for years before 2011, for years before 2010 for state income taxes, before 2010 for Israeli income taxes and before 2011 for Australian taxes. During 2014, the Company’s U.S. Federal income tax returns for the years ended December 31, 2011 through December 31, 2012 were examined by the IRS. No material adjustments were made by the IRS in the course of their audit.